Service charge capping rules maintenance overview
Most service charges are based on the actual or estimated cost of providing those services and therefore vary from year to year. These variable service charges, as they are known, can be increased or decreased in accordance with the terms of a tenancy agreement - normally supported by one months' notice period - and give the housing organisation greater certainty in the recovery of costs. A variable service charge does not mean that the social landlord can vary the services provided; only the charge levied for their provision. Legally, service charges can go up or down without any limit, but in reality the landlord is only permitted to recover reasonable costs. Typically, leaseholders would be expected to pay the full cost of any cascaded and apportioned service charges. Whereas, under the terms of a tenancy agreement, service charges levied to a tenant may be capped in order to uphold regard for the affordability of their total housing expenditure bill, and therefore limit the amount they are expected to pay.
In defining a service charge capping rule, a maximum threshold value is set, representing the combined service charge fee above which the capping rule is triggered. Tenants are therefore not liable for any service charges over this capped level. As well as specifying the cost elements that are applicable to the capping rule - grounds maintenance, lift maintenance, door entry system, concierge, etc. - the configuration settings permit the end user to determine which components can be reduced by a portion of the capped excess value. At the discretion of the end user, any unallocated excess derived through a capping rule can be offset against other cost elements outside of this 'apportionment eligible' attribute, but only once maximum values have already been deducted from the specified cost elements.
Separate help articles have been created for each key aspect of service charge capping rules maintenance, including: